Monday, January 7, 2013

New IT failure research and statistics

Project size: The average project size reported by the survey is about $5.5 million. (See notes below for discussion of project size.)

Success and failure metrics: In general, the simplest definition of failure consists of projects that are late, over-budget, or do not deliver planned benefits.

The following diagram tells this part of the story for 2009 and 2010:

We see a dramatic increase in late and over-budget projects in 2010, as compared with 2009. Significantly, survey respondents reported improved achieving a higher level of expected benefit than in the prior year.

One interpretation of this data suggests that companies prioritized project results over maintaining the budget or schedule plan. While that’s a positive sign, the survey commentary points out these numbers also indicate that executives did not plan their ERP implementations in a sufficiently realistic manner. These results definitely show good news and bad mixed together.

Although the report does not supply sufficient data to draw any conclusions on this point, it would be useful to correlate implementation rollout approach with budget or schedule overruns.

The diagram also shows that some implementations use a hybrid rollout, which incorporates both phased and big-bang for different parts of the system.

Customizations: ERP customizations can add complexity to implementations, increasing project cost and risk. In addition, customized code can make downstream upgrades more difficult and expensive. Despite these risks, only 15% of survey respondents installed “plain vanilla” software without any customizations.

Vendor selections: The following table shows the vendors that survey participants chose for their implementations; Oracle, SAP, and Microsoft top the list:

STRATEGIC ANALYSIS

The Panorama study is a useful indicator for understanding success and failure on ERP projects. For that reason, we must commend Panorama for its research contribution.